Category Archives: Market Manipulation

Tech Bubbles And SPACs

Financial Markets, Housing Market, Market Manipulation, Precious Metals, , ,

The following is an excerpt from the latest issue of my  Short Seller’s Journal:

I thought this chart showed yet another interesting signal that the stock bubble could be ready to pop:

It shows the spread (the difference) in the percentage sector weightings in the SPX between Technology and Energy & Financials. Prior to 2000 and between 2002 and 2016, the Energy/ Financial sector had a higher percentage weighting in the SPX than Technology. Currently the differential in the percentage weightings between Tech and Energy/Financials is negative. The last time this differential was negative occurred at the peak of the dot.com/tech bubble.

My interpretation is that the technology sector is a bellwether indicator of when market speculation becomes extreme and when retail piles into the action with blind ambition. Another indicator is the proliferation of SPACs (Special Purpose Acquisition Companies). Politely called “blank check companies,” these are blind pools of capital raised in the public market. SPACs do not have any existing businesses. Their purpose is to make some type of business acquisition within two years. This is what the top of a stock bubble looks like – just throw your money to a blind pool promoter and trust that they know how to invest it:

The SPAC sponsor may have an acquisition in mind at the time the money is raised, but the public stock investors have no idea what company or companies they are investing in at the time of the IPO. How’s that sound?  Why not pay a nose-bleed valuation for a business at the top of a business cycle?

In truth, SPACs are fee-generating cash cows for the sponsors. In addition, sponsors often end up with 20% of the shares, gratis, after the SPAC has merged/acquired a business.  Half of the IPOs YTD have been SPACs. Of the 18 that have gone public, 11 are trading below their IPO price. It’s one of the ultimate indicators of reckless speculative behavior, especially from retail investors, and the degree to which a stock bubble likely is reaching its limits.

A possible top indicator for the housing market?  United Wholesale Mortgage (“UWM”) is going public via a merger with a SPAC. The deal values UWM at $16 billion and it will be the largest SPAC deal to date. UWM is the largest wholesale mortgage lender in the country.  A wholesale mortgage lender funds mortgages offered through mortgage brokers, credit unions and banks.

The SPAC, Gores Holdings IV (GHIV), is paying UWM $925 million ($425 million in cash plus $500 million to raised via debt) for a 6% interest in UWM. UWM will own approximately 94% of the new United Wholesale Mortgage, which will trade under “UWMC.” Gore Holdings went public on August 10th, raising $525 million.

This type of deal is essentially a “reverse” IPO in which a private company goes public by merging with a public shell. The full terms of the deal are not available yet, but in all likelihood Alec Gores (the SPAC sponsor) and the senior executives of UWM will be awarded a large chunk of shares that will dilute the public shareholders. GHIV shares jumped to $12 on Wednesday after the deal was announced but closed Friday at $10.44.

Great time to invest in a mortgage finance company?  The delinquency rate on FHA mortgages is now at a record 17.4%. FNM/FRE/VHA mortgages will soon follow.  FHA started underwriting sub-prime-like mortgages in late 2008.  FNM/FRE/VHA began doing the same about 5 years ago.  In fact, the delinquency rate on VHA mortgages, which require zero down payment, is starting to accelerate.

This is a deal that I will be ready to pounce on with a short position after it goes public. I believe this is a bellwether indicator that the housing market is topping. Speaking of which, I’ll review the housing market data released this past week in the next issue. But, per usual, the headline reports for new and existing home sales sensationalized the actual home sale numbers.

As with general economic activity, there was a burst of activity in the housing market after the lock-down period. This was further fueled by the $1 trillion-plus in stimulus the Fed injected into the mortgage market. That, combined with the Fed’s zero-interest rate policy, pushed mortgage rates to the lowest in history.  I expect the burst of housing market activity to taper off quickly, similar to what we’re seeing in the reports for general economic activity for August and early September.

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The Stock Market Could Be In Trouble – Buy The Dip In Gold / Silver

Financial Markets, Gold, Housing Market, Market Manipulation, Precious Metals, U.S. Economy, ,

The price take-down in gold and silver is 100% a product of the trading activity – aided and abetted by the bullion banks in NY and London, who manipulate the price in the paper derivative market. All of the trading activity dictating this sell-off is occurring in the paper derivative markets – it has nothing to do with the economics of the physical gold and silver markets.

How do I know this? Consider that 404,000 Comex December paper gold contracts contracts traded on Wednesday. That’s equivalent to 1,262.5 tonnes of gold. That’s roughly 42% of the total amount of gold that will be mined in 2020. In other words nearly half a year’s worth of physically mined gold traded in one day in just one contract month.

The ONLY physical gold and silver that is transacting is at the London price fix. And it’s dubious as to whether or not physical gold and silver is actually changing hands. Most of the “settlement” occurs digitally and gold and silver do not physically change possession. It’s a bigger scam than pet rocks.

At some point the coming market, economic and political turmoil will trigger a big bid for gold and silver which in turn will translate into a big move higher for the mining stocks.

Silver Liberties invited me on to it’s podcast to discuss the imminent stock market crash, the popping of the housing bubble 2.0 and precious metals:

Carvana: Financial Fraud Pays Well

Financial Markets, Market Manipulation, U.S. Economy, , ,

CVNA’s valuation vs competitors like CarMax (KMX), Autonation (AN) etc is completely irrational. I was a CEO of a subprime company in this space. CVNA’s valuation is a crime of capitalism.” – @beaconstagezero

Ernest Garcia II was convicted on felony charges in connection with his involvement in the Charles Keating S&L Ponzi scheme which stole billions from innocent bystanders.  Garcia is the founder and Chairman of Carvana (CVNA).   His son, a chip off the old block, is the CEO.

This morning CVNA released a terse “preview” of its expected Q3 results in which it said the Company will achieve record revenues, units sold and gross profit per vehicle plus it said its EBITDA would “approximately” breakeven.

In the same breath it announced another $500 million bond financing. YTD including this deal, CVNA will have had to tap the capital markets for $1.7 billion.  Why?  Because it’s operations burn cash like a home furnace in Weimar Germany in the early 1920’s and because the founder/Chairman and his CEO son use CVNA as their personal piggy-bank.

The press release tandem can be read like this:  “Hey suckers, our results in Q3 will be ‘great’ so give us another $500 million loan because we can’t seem to make any money.”

Carvana’s Q2 2020 showed 15.3% YoY revenue growth vs Q2 2019. But the gross margin dropped 100 basis points from 16% last year to 15% in this year’s Q2. No wonder CVNA is generating revenue growth – just like every other overvalued “unicorn” company hatched in Silicon Valley, CVNA charges a price for its product that does not cover the cost of its business model.

How do we know this? Its operating loss soared 66.4% to $106 million of red ink from $64 million in Q2/19. The cash burned (used) in operations fell to just $7 million from $168 million in Q1/20. But this was attributable to a $215 million run-off of inventory from Q1. As I’ve discussed previously, CVNA does not price the cars it sells at a price high enough to cover the full cost of the business model. This is why it issues debt and stock quite frequently.

A big red flag for me is the fact that has had to issue stock three times raising $1.3 billion subsequent to going public in 2017 plus another $700 million in two separate junk bond deals in 2018 and 2019. Two of the three stock financings occurred in Q2 2020, yet the cash balance between Q1 and Q2 increased by just $76 million dollars, part of which is restricted cash.

The Company used $781 million to pay down a short-term revolver used to finance inventory. This also explains the run-off in  inventory.  Including the inventory run-off in Q2, the Company has raised $2.7 billion in funding since going public, including the $500 million bond deal announced today. This is essentially the amount of cash burned by CVNA’s operations since its April 2017 IPO.

This Company does not make money and it never will unless it charges a much higher price for the vehicles it sells, in which case its sales volume will plummet. CVNA is 60% owned by Chairman/founder, Ernest Garcia (a convicted felon), and 40% owned by the public. Garcia sucks money out of Carvana via a series of “related party” arrangements which include the leasing of office space and other facilities, paying a Garcia-owned business for used car reconditioning services and selling usage time on a corporate aircraft indirectly owned by Garcia. A Garcia-owned company also gets paid for servicing CVNA’s finance receivables. The conflict of interest and self-dealing between CVNA and Ernest Garcia II (Chairman) plus Ernest Garcia III (CEO) is mind-boggling.

The bottom line is that CVNA is functions as a vehicle (so to speak) that Ernest Garcia and his son use to raise money in the public capital markets and suck that money out of CVNA for personal gain.  It’s the epitome of fraud and corruption.

The short interest represents 30% of the share float, which explains the ridiculous run-up in the share price after the Company’s announcement today. Clearly I’m not the only one who has dissected the footnotes to the financials and determined that CVNA is to a large degree Ponzi scheme with an absurd market valuation.

Quite frankly I would bet that the asset value of the Company is not a lot greater than the amount of debt outstanding. The tangible assets – finance receivables (i.e. subprime loans extended to customers), inventory and unrestricted cash – are carried at $1.2 billion. The finance receivables ballooned in Q2 to $358 million from $199 million in Q1. This tells us that the Company lends aggressively to subprime borrowers.

There’s no way the market value of that crap is worth $358 million. PP&E is carried at $704 million. Thus, CVNA’s “hard” assets total $1.9 billion giving full value to receivables. Total debt plus payables was $1.4 billion at the end of Q2. Subtracting the debt from the tangible assets leaves $500 million of asset value. Beyond that, what is the value of a business that burns several hundred million in cash on an annual basis?

CVNA’s market cap at Friday’s close was $30 billion. If you laid out the numbers in the paragraph above and told me that the business described was valued this high, I would have thought you were hallucinating.

CVNA is an example of the type of business model, along with the operational and financial fraud crawling like cock-roaches beneath the surface, that has been enabled by 13 years of money printing by the Fed.  Thirty years ago when the financial regulator still maintained some independence from the big Wall Street banks, CVNA would not have survived very long.

The commentary above is from the August 9th issue of my Short Seller’s Journal. You can learn more about this newsletter here:  Short Seller’s Journal information.

A Matter Of Time Before Stocks Collapse And Gold Soars

Financial Markets, Gold, Housing Market, Market Manipulation, Precious Metals, U.S. Economy, ,

“Look at the underlying fundamentals that are driving it [gold and silver prices]. The financial condition of the country that hosts the reserve currency deteriorates more everyday and the Central Bankers are trying to kick the can down the road on an inevitable financial system and monetary system reset by printing more money.”

The economy continues to show signs that the “sugar high” from the Fed’s and Government’s multi-trillion dollar money printing and stimulus spending is wearing off. The latest economic reports – notwithstanding the moronic homebuilders “sentiment” metric – reflect a renewed downturn in economic activity plus the numbers reported in July are being revised lower (see today’s retail sales report, for instance).

As long as the Fed continues to devalue the dollar by printing money and as long as Treasury debt continues to increase at an increasing rate, the fundamentals are in place for a monster move in gold, silver and mining stock.

Michelle Holiday of Portfolio Wealth Global invited me on to her podcast to discuss the factors that I believe will lead to a stock market avalanche and soaring values in the precious metals sector:

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Note:  I do not receive any promotion or sponsor payments in any form from the mining stock companies I present in my newsletter. Furthermore, I invest in many of the ideas personally or in my fund.

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Gold (And Silver) Are Extraordinarily Undervalued

Financial Markets, Gold, Market Manipulation, Precious Metals, U.S. Economy, ,

Many subscribers ask me about taking profits on their physical gold and silver. While there’s nothing wrong with taking profits on your metal, it defeats the purpose of converting fiat currency into physical gold and silver.

The chart above from James Turk (Goldmoney.com) illustrates the power of gold’s (and silver’s) wealth preservation attributes. The chart shows the cost of oil measured in dollars (green line), euros (purple line), pounds (blue line) and goldgrams (red line). It uses 100 as the “base” price for oil.  A gram of gold buys the same amount of oil now as it did in 1950.  In contrast, takes a considerable amount more of dollars, euros or pounds to buy the same amount of oil now as each would have purchased in 1950.

If you have large profits in your physical gold/silver holdings and taking profits will make you feel more comfortable, by all means do so.  I’m holding all of my gold and silver for when the dollar collapses and there’s a monetary reset.  A reset that incorporates gold and silver into the currency system should incorporate a substantial upward revaluation of gold  (and silver) priced in all fiat currencies to a level that makes me indifferent between holding the metal or holding the new currency. Those who converted their metal into dollars before a reset occurs will be holding worthless paper.

Chris Marcus (Arcadia Economics) and I discuss several reasons why gold (and silver) is extraordinarily undervalued:

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A portion of the commentary above is from  the latest issue of the Mining Stock Journal. You can learn more about  this newsletter by following this link:  Mining Stock Journal subscription information

Note:  I do not receive any promotion or sponsor payments in any form from the mining stock companies I present in my newsletter. Furthermore, I invest in many of the ideas personally or in my fund.

Gold And Silver Are Set Up For A Huge Move

Financial Markets, Gold, Market Manipulation, Precious Metals, U.S. Economy, , ,

“There is a growing recognition that the much-heralded V-shaped recovery is not going to happen beyond a temporary recovery following lockdowns. That being the case, the Fed is committed to unlimited monetary inflation, which is already undermining the dollar, the trade weighted version of which continues to decline.” – Alasdair Macleod, Goldmoney.com

Institutional investors have maybe 0.5% of their assets invested in the precious metals sector. At the peak of the gold/silver in 1980 institutions had 5% invested in the precious metals sector. Since then that allocation has not been above 1%. Eventually a monster move is coming in silver and the mining stocks, though no one can say when it will occur.

The catalyst for the move will be large institutional and wealthy investors reallocating cash from the stock market in general into mining stocks. I believe Buffet was a harbinger of that even though he only bought a small amount of Barrick in relation to the size of Berkshire’s assets.

The overrbought condition that developed in July/early August is now neutral/oversold per the RSI and MACD indicators. Yesterday gold bounced off its 50 day moving average. Technically gold (and silver) is set up for a bullish move.

In addition, based on the data from India which reflects gold import activity (from John Brimelow’s Gold Jottings report), India started importing dore bars Monday and soon will be importing kilo bars. India has been absent for the last three weeks.

September through December is the seasonal period when India imports its most gold on an annual basis. This will have the  effect of exacerbating the already tight supply of gold available for delivery to buyers who demand actual physical delivery rather than leaving purchased gold in bank custodial vaults.  A groomsman in India dare not show up to a wedding with just a receipt for gold purchased to give to his bride.

Chris Powell (GATA.org) also pointed out several more factors that indicate the potential for a monster move in the precious metals and mining stocks:

— the smashdowns don’t work as they used to, seldom more than a couple of days;

— volatility in the metals has exploded;

— the geopolitical situation is growing more strained, not less;

— The U.S. and European economies are wrecks – the massive money printing directed at the deferral of financial and economic collapse functions as rocket fuel for gold/silver.

Furthermore, Chris points to the obvious indications that the supply of physical gold that can be delivered to entitled buyers on the Comex and the LBMA is exceptionally tight:

— The mechanics of the market: the rise and fall of EFPs, the sudden conversion of the Comex to physical off-take, the panicked dance between the LBMA and the Comex, the huge expansion of the Comex’s approved bar list, the failure of the Comex open interest to contract on falling prices, all of which suggest big underlying changes and increasingly tight supplies – whether one disagree’s or not with Andrew Maguire, he has been shouting for months that it’s impossible to get prompt delivery of metal in the LBMA system and is consistent with the unusual behavior exhibited by the CME/Comex and LBMA since April;

Finally, per the research of GATA consultant, Robert Lambourne, BIS intervention in the gold market on behalf of its member Central Banks is at its highest level in years and perhaps its highest level in history for the second month in a row (July and August).  Historically BIS gold swap activity has been suspiciously correlate with visible bullion bank efforts to prevent the price of gold from rising.

While the gold price was unable to sustain its move over $2,000 – for now – the overt price intervention efforts over the last 4 weeks has had, at best, limited success.  At some point this effort will fail.

Though it can’t be proved without access to the BIS records – and the BIS refuses to comment on its gold swap activities (as does the Fed) – it is thought by many who have evaluated the swap activity that the BIS uses this operation to make physical gold bars available to Central Banks for market interventions and delivery obligations.  Likely it is not a coincidence that for most of August both the a.m. and p.m. London price fixings have featured heavy offerings almost daily  which result in downward pricing pressure on gold.

All of the above factors lead me to conclude that there’s a high probability that the precious metals sector will stage a big move between now and the end of the year.

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A portion of the commentary above is from  the latest issue of the Mining Stock Journal. You can learn more about  this newsletter by following this link:  Mining Stock Journal subscription information

Note:  I do not receive any promotion or sponsor payments in any form from the mining stock companies I present in my newsletter. Furthermore, I invest in many of the ideas personally or in my fund.

Here Comes The Next Round Of Tyranny: The Vax’ers

Financial Markets, Market Manipulation, U.S. Economy, , ,

“The unsustainable will not be sustained, except through ever-increasing force and fraud.” –   “Jesse,”  Jesse’s Cafe Americain

Here come the greed-head Vax’ers. We know after many decades that the flu vaccine has limited – if not unverifiable – efficacy.  But Big Pharma will use its corruption and political muscle in an attempt to force the public to accept a hastily devised COVID “vaccine” – one that will have had a negligible amount of testing and proof of efficacy. And judging by the number of zombie humans wearing masks wherever they go – including in their own car with the windows closed – many sheeple will gladly accept the “vaccine.”

“Pfizer CEO Albert Bourla warned on Tuesday that people who don’t take the Covid-19 vaccine will become a ‘weak link’ that allows coronavirus to spread.” – CNBC

The commentary by Bourla is at best reprehensible.  More likely it’s the propaganda of  a sociopathic misanthrope motivated by extreme greed. The Big Pharma company that brings to market a Covid “vaccine” first, regardless of its efficacy or safety, will reap Wrath of God profits.  Most of it funded by the Taxpayers.

The U.S. has been gradually creeping toward Totalitarianism since 1913.  The process accelerated after 9/11, when the President and Congress systematically stripped away several of the Bill of Rights.  Obama codified the Detainee Bill, removing Habeus Corpus from the U.S. legal system.  Habeus Corpus is one of the pillars of Rule of Law.  He also enabled the Too Big To Fail Banks to take control of the entire financial regulatory bureaucracy, including the Justice Department.

Now it’s Big Pharma’s turn to feed at the trough.

Where this goes next is anyone’s guess.  But the path to Totalitarianism is unavoidable unless the public rallies and revolts.  Brace yourself because everything that has unfolded over the last 12 years is going to get a lot worse…

Jerome Powell Confirms Intent To Hyperinflate The Dollar Supply

Financial Markets, Gold, Market Manipulation, Precious Metals, U.S. Economy, , , , ,

“After thinking about it all day, I’m still not quite sure this isn’t a joke; a high-brow commitment of utterly brilliant performance art, the kind of Four-D masterpiece of hilarious deception that Andy Kaufman would’ve gone nuts over. I mean, it has to be, right?” – Jeffrey Snider, Alhambra Partners

No Jeffrey,  Powell’s speech was not a cruel joke.  But it certainly was loaded with “Fed speak.”  The bottom line is that “letting inflation run above the 2% target rate” is code for: “we have to print a helluva lot more money to keep the stock market and the big banks from collapsing.”

In our latest weekly update, Chris Marcus (Arcadia Economics) and I discuss the farce delivered by Jay Powell yesterday morning:

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In the latest issue of the Mining Stock Journal I discuss profit-taking in miners, use of options to leverage returns, the Auryn/Eastmain merger and a new idea. You can learn more about the Mining Stock Journal by following this link:   MSJ Subscription Info.

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